Margin Improvement – Introduction

There is scepticism in the telecoms channel about margin improvement, as the feeling is that there is a lot of pressure to offer the lowest price possible. The options that are available are apparently restricted to pushing back on the suppliers and selling high volumes of product at low prices to the customer. This transactional model is particularly suited to commodities but the downside of this approach when applied in isolation to complex solutions sales is that it can generate thin margins, with very little room for manoeuvre, or mistakes.

The long term solution comes from looking at the various situations that have lead to thin or non-existent margins and low or loss making lines. Then working out the objective and deciding where the business needs to be. All whilst avoiding the temptation to simply put the prices up.

This is hard work and there is no way around it. For the telecoms channel, Ofcom is very specific about it and in any case, it doesn’t say much for your relationship with the customer if you are delivering one message at the sales pitch and then increasing the cost when you discover the sums are wrong.

It takes courage to admit that the business isn’t at the peak of its commercial efficiency. However, without taking some time on a regular basis to review the arrangements with suppliers, customers and partners there is a risk of missing opportunities to generate revenue as well as spending more than is needed on essential products and services.

Finding out the cause is the key. In my experience it can be a combination of factors. Including, but not limited to emulating a well known headline offer without cross selling complimentary bundle items, not updating commercials when supplier rates change, or simply not exploring all of the commercial options available for a particular product line.

This is something that has to exist across the entire business, as once the task of identifying the low areas of margin have been identified and the gap analysis achieved, implementing the change with customers and suppliers will touch every department from business management and marketing through to sales and credit control.

Over the next few posts we’re going to explore how each step is taken and who is involved. From the business objectives, marketing the companies message, the sales approach, the product and account management.